Weak Coffee and Franc, Two Strong German Equities

Daily Analysis - 09/01/2018

The GBP is gaining ground on the Swiss Franc

coffee-price


Capitalising on a global trend of rushing into the equities market, not only in the US but in Europe and Asia as well, stocks are defying gravity and continue to rise. Coffee is falling on what looks like a bumper crop in the Arabica growing regions of Brazil, while Siemens the giant manufacturing conglomerate and RWE the German energy supplier are moving up smartly.

Coffee grows tired


Coffee fell 3.30 Cents per pound or 2.57% to 125.05 yesterday from 128.45 on Friday. Coffee’s all-time high of 339.86 was reached in April of 1977 and its all-time low of 42.50 was seen in October of 2001. According to the composite forecast produced by Tradingeconomics.com (an excellent source of data and information we should consult regularly) Coffee is expected to trade at 121.00 Cents per pound by the end of this quarter, according to their global macro models and analysts’ expectations. Looking forward, they estimate Coffee will trade at 96.90 by the end of 2018. Coffee down.

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Siemens is strongly up on plans to list its healthcare division


Siemens plans to list its 40 billion euro healthcare division Healthineers in March, sources close to the matter reported by Reuters said, as the group hopes to execute the deal while market conditions are favourable. The Frankfurt listing of a minority stake in Healthineers, which makes X-ray and MRI machines, is expected to be Germany's biggest IPO this year. It is likely to be announced in the first few days of March, with an initial public offering taking place four weeks later sources said.  Siemens will test the appetite of sovereign wealth funds ahead of the planned listing of its healthcare unit Healthineers next year, its chief executive told a German weekly, possibly to secure anchor investors for the flotation.  Siemens is expected to sell 15-25 percent of Healthineers, sources have said, implying stock worth 6-10 billion euros could be sold - Germany's biggest share offering since Deutsche Telekom in 1996. World stock markets are close to all-time highs with the combination of solid global growth and low inflation.

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RWE heating up strongly


RWE AG is a holding company, which engages in the generation, transmission, distribution, and trading of electricity and gas. As the prices of the raw material inputs of energy firms products rise so too does their bottom line, by more than the cost that the raw material themselves rise. ExxonMobil, Total, BP Royal Dutch Shell and so forth are no exceptions to this phenomenon either. As the demand for gas to heat a frigid US skyrockets, the knock on effect, meaning that what happens to the price of a commodity in one location, remote though it may be from another location has a similar if not identical effect on the distant commodity. Like the relationship between WTI and Brent crude blends: geographically diverse, joined at the hip via price. RWE as a large energy, particularly natural gas supplier sees its revenues and profits rise as the price of one of its major raw material inputs rise. RWE up.

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Swiss gives way to Sterling


The British Pound has been putting in a pretty strong performance of late in particular today against the Swiss Franc. The rises, besides the technical aspects, which are strong, meaning we thing the trend is likely to persist for the near and medium term, (in the currency markets this means a day or three). The prospects for Britain and therefore by extension its proxy, the GBP, looks much better than the doom sayers and anti-Brexiters have been chanting. Prospects for a possible set up like Canada or Australia or South Africa or India have, where trade is conducted on bilateral independent bases with the world are looking better, to some, this analyst included, than the weighty bureaucratic system of consensus that is the European Union. GBPCHF Up.

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